Tax Credits Calculating
Events such as stooping through a short door or trying to reach a book off the top shelf make you realize how uncomfortable it is to be the wrong size. The same goes for taxes. That is, a majority of tax benefits are only open to specific groups, such as families and individuals whose AGI (adjusted gross incomes) or MAGI (modified adjusted gross income) falls within certain limits.
It is not hard to calculate your adjusted gross income. The calculation simply requires that you take all of your income reported and subtract your deductions. Legally, you can take the following as deductions from your total gross income.
Expenses for employees:
- Fifty per-cent self-employment tax
- Contributions to plans for qualified retirement, investment and savings
- Up to $250 Educator’s expenses
- Expenses paid for rent and royalties
- Performing artists’ qualifying expenses
Medical Expenses
-Archer Medical Savings Accounts (MSAs)
-Health Savings Account (HSA) contributions
-Self-employed health insurance
Investment Expenses
-Capital losses up to $3,000.
-Interest forfeited by withdrawing certificates of deposit (CDs) before their maturity date
Business Expenses
-General business expenses
-Domestic production activities deduction
-Net operating losses (NOLs)
Educational Expenses
-Student loan interest up to $2,500
-Tuition and fees up to $4,000
-Travel expenses from attending National Guard or military reserve meetings more than 100 miles from home
Other Expenses
-Jury duty pay turned over to your employer
-Legal fees for illegal discrimination claims
-Moving expenses
-Unemployment benefits repaid because of trade readjustment allowances
Of course, if you are nearly finished or have already filed your tax return, finding your AGI is easy – it’s already on your return! You can find your AGI on line 37 of the 2007 Form 1040, line 21 of the 2007 Form 1040A, or line 4 of 2007 Form 1040EZ.
Tax benefits may be based on your MAGI, or modified adjusted gross income, rather than your AGI. Your MAGI is calculated by taking the AGI and adding back in certain deductions. These deductions depend upon the specific type of benefit, and so you will have more than one MAGI. For example, in calculating your MAGI for student loan interest deduction, the calculation includes taking the amount deducted for tuition, fees, foreign earned income, and other foreign income and expenses, and adding these back to your AGI.
Once you calculate your AGI and MAGI, it will be much easier to determine which tax benefits you qualify for. Sometimes your AGI will be too high for you to claim a certain credit. Sometimes it will be too low. But other times, it will be just right!
By: Ron Finkelstein
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March 25th, 2010 at 3:41 pm
[...] Social Security program began with the Social Security Act of 1935. The nine digits assigned to you remain permanent for the rest of your life. The social security number is used to maintain a check on the individual’s accounts. It is also used as an identification and authentication card for the citizens of America. You can apply for Social Security number (SNN), when you start your first job. Under the Act, social security provides insurance for old age, disability and also provides insurance to survivors. It also provides supplemental security income for elderly or disabled people. The money for social security is raised from the taxes paid by the employers and employees as Social Security tax. [...]